(Clarifies in penultimate paragraph of Thursday's story that
CEZ shares fell due to ex-dividend trade rather than due to
Bulgarian asset sale)
* Crown firms ahead of rate hike, then retreats
* Czech cbank chief says hard to say if further hike needed
* Forint hits record low vs both euro and crown
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, June 27 (Reuters) - The crown hit record
highs against the falling forint as the Czech central bank (CNB)
increased interest rates again on Wednesday, earlier than some
market participants had expected.
More than half of analysts in a Reuters poll had expected
the hike to come only in August, when the CNB will also publish
new inflation forecasts.
Wednesday's rate hike was still not a huge surprise after a
pick-up in inflation across Central Europe, partly fuelled by a
weakening of its currencies in the past two months due to risk
aversion as the dollar and U.S. debt yields rallied.
The crown joined the decline, even though the CNB
started hiking its rates last August, while Hungary and Poland -
where inflation targets are above the Czech Republic's 2 percent
- have retained a loose monetary policy.
reut.rs/2tyysay
Shedding slightly more than 1 percent against the euro so
far this year, the crown has still comfortably outperformed the
forint, which has weakened almost 5 percent and the
zloty, which has eased near 4 percent.
The crown is still weaker than the 25.2 level predicted by
the CNB for the second quarter.
Anticipation of Wednesday's rate hike, the fourth one in the
current cycle, boosted the crown to a two-week high of 25.69
against the euro in early trade.
It had retreated by 1355 GMT, trading at 25.855, still
firmer by a quarter of a percent.
It gave up some ground after the CNB's rate decision and its
news conference, where Governor Jiri Rusnok said it was
difficult to say what further rate hikes may be needed.
The CNB would need one more rate hike this year and a
further 75 basis point rise next year, Capital Economics
analysts said in a note.
"This would be slightly more tightening than is priced into
financial markets," they added.
The forint, meanwhile, shed 0.4 percent against
the euro, to trade at 326.9, off record lows touched in early
trade.
The zloty eased 0.2 percent, while the leu
gained 0.2 percent. Romania's central bank has also
started to raise interest rates.
The crown set a record high against the forint
during the session, and hit a 5-year high against the zloty
.
Hungary's central bank last week shifted to a less dovish
rhetoric, saying that loose monetary conditions were unlikely to
prevail until the end of its policy horizon of 5-8 quarters.
But investors continued to sell the forint.
Hungarian government bond yields, however, did not rise
further after a rally in the past months, and even shed a few
basis points, with the 10-year paper fixed at 3.54 percent.
While regional stock markets were mixed, Prague's main stock
index shed one percent.
The fall was driven by a 6 percent decline in the stock of
energy group CEZ which started trading without a
dividend.
The stock of Czech bank Komercni rose 0.8 percent.
CEE SNAPSHOT AT
MARKETS 1555 CET
CURRENCI
ES
Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 25.8550 25.9200 +0.25% -1.21%
crown >
Hungary <EURHUF= 326.9000 325.6500 -0.38% -4.89%
forint >
Polish <EURPLN= 4.3400 4.3330 -0.16% -3.77%
zloty >
Romanian <EURRON= 4.6525 4.6620 +0.20% +0.58%
leu >
Croatian <EURHRK= 7.3800 7.3815 +0.02% +0.68%
kuna >
Serbian <EURRSD= 117.9000 118.0000 +0.08% +0.51%
dinar >
Note: calculated from 1800 CET
daily
change
Latest Previous Daily Change
close change in 2018
Prague 1051.13 1061.490 -0.98% -2.51%
0
Budapest 35569.26 35352.03 +0.61% -9.67%
Warsaw 2142.52 2153.40 -0.51% -12.95%
Bucharest 7930.69 7965.38 -0.44% +2.28%
Ljubljana <.SBITOP 883.79 883.32 +0.05% +9.60%
>
Zagreb 1812.65 1814.03 -0.08% -1.64%
Belgrade <.BELEX1 730.53 730.23 +0.04% -3.85%
5>
Sofia 631.71 631.87 -0.03% -6.75%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
2-year <CZ2YT=R 1.0700 -0.0210 +177bps -2bps
R>
5-year <CZ5YT=R 1.5970 -0.0120 +189bps -1bps
R>
10-year <CZ10YT= 2.1970 -0.0010 +187bps +0bps
RR>
Poland
2-year <PL2YT=R 1.6370 -0.0020 +233bps +0bps
R>
5-year <PL5YT=R 2.5390 -0.0030 +283bps +0bps
R>
10-year <PL10YT= 3.1990 -0.0520 +287bps -5bps
RR>
FORWARD RATE AGREEMEN
T
3x6 6x9 9x12 3M
interban
k
Czech Rep 1.17 1.29 1.43 0.93
<PRIBOR=
>
Hungary 0.60 0.76 0.95 0.26
Poland 1.75 1.77 1.81 1.70
Note: FRA are for ask prices
quotes
*************************************************
*************
(Editing by Gareth Jones)